Record Yearend Backlog of $3.5 Million for Fiscal Year 2020
- Strong demand in leading markets drove a sales increase of 32.3% over fiscal 2019 to $15.3 million with gross margin of 48%, a 240 basis point improvement; For the fourth quarter, sales were up 88% over the prior-year period with gross margin of 48%, a 280 basis point improvement.
- Higher net sales were driven by demand for highly customized ultrasonic coating systems in the electronics/microelectronics market, as well as increased sales in the medical market for stent coating machines. The continued product line expansion towards more complex higher value machinery, at higher prices, was a major factor in this growth.
- Achieved record yearend backlog of $3.5 million, up 16% over the prior year from continued strong demand in the microelectronics/electronics, specialty glass, and medical markets.
- First quarter of fiscal 2021 sales growth is expected to increase approximately 21% from the prior year period with measurable conversion of sales to operating income and earnings.
MILTON, N.Y., May 29, 2020 – Sono-Tek Corporation (OTCQX: SOTK) the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for its fourth quarter and fiscal year ended February 29, 2020 (“fiscal 2020”).
Dr. Christopher L. Coccio, Chairman and CEO of Sono-Tek, commented, “During fiscal 2020, our strategy to expand the addressable market for our unique ultrasonic coating technology continued to gain traction, reflecting our ongoing development of new, complex solutions for the Alternative Energy, Microelectronics and Medical markets. These more complex solutions address high value applications for our customers and provide economically compelling alternatives to traditional coating technologies. We focused our sales and marketing resources on these targeted opportunities and, combined with strong market conditions, generated a sales increase of 32.3% to $15.3 million for the fiscal year.”
“The strong sales growth and 240 basis point improvement in gross margin increased our operating leverage and drove a nearly seven-fold increase in net income to a record $1.1 million for the year. We achieved this even as we continued to invest in advancing our technologies through new product development and adding to our experienced staff of application engineers to further fuel growth.”
“Our strong pipeline of opportunities gained momentum as well. This momentum, combined with our record yearend backlog of $3.5 million, would normally provide us with confidence in our expectations for significant revenue growth in fiscal 2021. However, COVID-19 broke out just as we began our new fiscal year in March 2020, making the full years revenue more challenging to forecast. With a strong pre-COVID-19 backlog in place, we now anticipate achieving a revenue increase of approximately 21% for the first quarter of the new fiscal year, which ends May 31, 2020. This is slightly less than our prior forecasted Q1 growth, and results from a delayed shipment of 1 -2 weeks, due to COVID-19 related schedule challenges. It is also possible to forecast an improved second quarter, with revenue growth of 15% – 20% compared to last fiscal year, as our business has evolved to larger projects with longer lead times. At this time though, we don’t believe that we will be able to maintain the same pace of growth in the last two quarters of the year compared to the same period of last fiscal year, due to the current economic uncertainty coupled with lower GDP and higher unemployment. Therefore, the negative impacts of COVID-19 on our business are most likely to occur in the second half of FY2021 and first half of FY2022, unless the lockdowns ease on our customers and their consumers soon. We are continuing to work hard to accelerate our growth strategies and develop new business to offset the potential COVID-19 related declines and firmly believe that we will thrive in spite of the current economic issues due to our market leadership and successful history of developing our target markets,” concluded Dr. Coccio.
Fiscal 2020 Review (Results compared with fiscal 2019)
|($ in thousands)||Change|
|FY 2020||FY 2019||$||%|
|Net Sales||$ 15,355||$ 11,610||$ 3,745||32%|
|Gross Profit||$ 7,313||$ 5,249||2,064||39%|
|Operating Income||$ 1,115||$ 82||1,033||1,260%|
|Net Income||$ 1,107||$ 162||$ 945||583%|
The introduction of several new high value machine offerings, in combination with our continued investment in application engineering capabilities, drove sales up 32% to $15,355,000, compared with the prior fiscal year.
In fiscal 2020, approximately 71% of sales originated outside of the United States and Canada. This compares with 65% in fiscal 2019. The geographic shift was mostly due to higher sales to Asian and European markets.
Gross profit and operating margins for fiscal 2020 increased to 47.6% and 7.3%, respectively, from 45.2% and 0.71%, respectively, for fiscal 2019. The higher gross profit margin reflects a strong year in providing complex coating solutions with increased applications engineering value to our customers, as well as a shift in the mix of our markets. The shift in mix reflects increased sales to the microelectronics and medical sectors, whose products contain the highest value of our applications expertise and contributed to increased margins as well.
Sono-Tek achieved net income of $1.1 million, or $0.07 per share, basic and diluted, compared with $0.06 million, or $0.01 per share, basic and diluted, in the prior year. Weighted average fully diluted common shares outstanding were 15,359,088 and 15,218,913 in fiscal 2020 and fiscal 2019, respectively.
Fourth Quarter Fiscal 2020 Review (Results compared with the fourth quarter of fiscal 2019)
|($ in thousands)||Change|
|FY 2020||FY 2019||$||%|
|Net Sales||$ 5,514||$ 2,936||$ 2,578||88%|
|Gross Profit||$ 2,665||$ 1,336||1,329||99%|
|Operating Income (Loss)||$ 749||$ (14)||763||5,450%|
|Net Income||$ 688||$ 61||$ 627||1,028%|
Balance Sheet and Cash Flow Overview
Net cash generated in operating activities was $3,254,000 in fiscal 2020, compared with usage of $109,000 cash in fiscal 2019. Capital expenditures in fiscal 2020 increased to $722,000 compared with $547,000 in the prior fiscal year.
At February 29, 2020, the Company had total debt of $708,000, down $163,000 from fiscal 2019 year-end. Total debt is approximately 7% of the Company’s total capitalization and is related to the mortgage on the industrial park where the Company’s manufacturing operations are located.
Sono-Tek has a revolving credit line of $1,500,000 and a $750,000 equipment purchase facility, both of which had no outstanding borrowings at year-end.
On April 17, 2020, the Company entered into a loan transaction pursuant to which it received loan proceeds of $1,001,640 on May 8, 2020 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act, provides for loans to qualifying companies and is administered by the U.S. Small Business Administration.
Sono-Tek Corporation is the leading developer and manufacturer of ultrasonic coating systems for applying precise, thin film coatings to protect, strengthen or smooth surfaces on parts and components for the microelectronics/electronics, alternative energy, medical and industrial markets, including specialized glass applications in construction and automotive.
The Company’s solutions are environmentally-friendly, efficient and highly reliable, and enable dramatic reductions in overspray, savings in raw material, water and energy usage and provide improved process repeatability, transfer efficiency, high uniformity and reduced emissions.
Sono-Tek’s growth strategy is focused on leveraging its innovative technologies, proprietary know-how, unique talent and experience, and global reach to further develop microscopic coating technologies that enable better outcomes for its customers’ products and processes.
For further information, visit www.sono-tek.com.
Safe Harbor StatementWe discuss expectations regarding our future performance, such as our business outlook, in our annual and quarterly reports, press releases, and other written and oral statements. These “forward-looking statements” are based on currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from our expectations. These factors include, among other considerations, general economic and business conditions; political, regulatory, tax, competitive and technological developments affecting our operations or the demand for our products; the duration and scope of the COVID-19 pandemic; the extent and duration of the pandemic’s adverse effect on economic and social activity, consumer confidence, discretionary spending and preferences, labor and healthcare costs, and unemployment rates, any of which may reduce demand for some of our products and impair the ability of those with whom we do business to satisfy their obligations to us; our ability to sell and provide our services and products, including as a result of continued pandemic related travel restrictions, mandatory business closures, and stay-at home or similar orders; any temporary reduction in our workforce, closures of our offices and facilities and our ability to adequately staff and maintain our operations resulting from the pandemic; the ability of our customers and suppliers to continue their operations as result of the pandemic, which could result in terminations of contracts, losses of revenue, and further adverse effects to our supply chain; maintenance of increased order backlog, including effects of any COVID-19 related cancellations; the imposition of tariffs; timely development and market acceptance of new products and continued customer validation of our coating technologies; adequacy of financing; capacity additions, the ability to enforce patents; maintenance of operating leverage; consummation of order proposals; completion of large orders on schedule and on budget; continued sales growth in the specialty glass and portable electronics markets; successful transition from primarily selling ultrasonic nozzles and components to a more complex business providing complete machine solutions and higher value subsystems; and realization of quarterly revenues within the forecasted range. We refer you to documents that the company files with the Securities and Exchange Commission, which includes Form 10-K and Form 10-Qs containing additional important information.
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